Will Walmart Win the E-Commerce Battle?

Imitation, they say, is the sincerest form of flattery, so clearly Walmart’s decision to test the use of lockers in its stores for pick-up of online orders is a compliment to Amazon.com, which has done something similar at 7-Eleven and Staples. According to reports, Walmart will begin the test this summer.

Speaking of imitation, Walmart, similarly to Macy’s, has also begun a pilot shipping online orders from a small number of stores.

"Is it really efficient to use our stores. We’ve been picking and putting items in boxes for years," Joel Anderson, chief executive of Walmart.com, told Reuters. "Ship from store is no different. We are picking items from the shelves and putting them in a box."

This year, according to Reuters, Walmart plans to ship orders from 50 or so locations. Macy’s plans to ship orders from 500 of its stores by year-end.

Walmart recently held its first media day to introduce a number of its e-commerce initiatives including a new search engine that can handle the tremendous increase in product selection the retailer has planned for its site. Currently, Walmart.com offers about two million items for sale.

"We are demonstrating we can build whatever any other e-commerce company can do, and combine that with the world’s largest retailer to provide a commerce experience no one else can provide," Neil Ashe, president and CEO of Walmart Global eCommerce, told reporters, according to Internet Retailer.

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Discussion Questions

What among all the things Walmart is doing with its online business, either mentioned in this article or not, do you think will bring the greatest rewards in both the short and longer term? What competitor do you see as the biggest threat to Walmart.com’s market share going forward?

Poll

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Max Goldberg
Max Goldberg
11 years ago

To be successful in e-commerce, Walmart needs to broaden the selection of items it offers online, make finding those items as simple as one click, and offer a seamless experience to consumers (online and offline prices need to match, buy online return to store). Few traditional retailers have mastered any of these areas.

Amazon built its business to run at Internet speed and efficiency and backed it with great customer service. Without having physical stores, it did not have to worry about creating a seamless shopping experience. In every aspect but physical stores, Amazon is Walmart’s biggest competitor. Not having physical stores has not held back Amazon’s growth.

The pressure is on Walmart to up its game and compete with Amazon.

Lee Peterson
Lee Peterson
11 years ago

We just did a study with over 2,000 consumers and the number one online to retail feature in their minds was ‘buy online, pick up in store’. So, Walmart (and Amazon for that matter) must know this as well.

The strategy most likely is, let’s take care of some no-brainers first, then get more complex or expensive (same day shipping, etc.) when we need to, or can leverage the cost in some other way.

Matt Lincoln
Matt Lincoln
11 years ago

Amazon.com will be the biggest threat to Walmart.com’s market share going forward. Amazon has already established itself as the clear leader in eCommerce. Additionally, Amazon has continually invested in itself and scaled efficiency. I would consider calling Amazon.com a supply chain company instead of an eCommerce company.

Physical stores need to be able to create a true omnichannel experience. No retailer has been able to do this today. Retailers will have to evolve to actual showrooms and ship products same day. Amazon has been toying with the idea of creating these showroom stores itself with incentives for their prime members. Expect to start seeing this trend in the next couple of years.

Richard J. George, Ph.D.
Richard J. George, Ph.D.
11 years ago

Both Walmart and Amazon are addressing the “final mile’ in a a variety of ways. Walmart’s approach is based on generating efficiencies while Amazon is testing more customer convenience alternatives. These experiments will continue with new models being tested for their effectiveness and efficiencies.

Amazon is the biggest threat to Walmart.com as well as to Walmart’s bricks and mortar business. The same can be said for all traditional food retailers. However, the bricks and mortar retailers have an opportunity to positively differentiate themselves from the pure play online retailers by combining online with fun-to-shop stores.

For example, I envision a day when the Center of Store (COS) will be significantly diminished. Many of the COS products will be purchased online from the “bricks-and-mortar” retailer and delivered to the store for direct placement into a consumers vehicle. This will then free up consumers to shop enhanced and exciting perishable departments, than proceed to a designated area and have their online purchases placed into their vehicles.

What does this mean for traditional food retailers? I suggest that the deadly COS, which was designed to make it easy for food retailers to stock and monitor and boring for customers to navigate and buy, will be replaced by stores that customers would actually look forward to visiting.

One vision that I have is of a store with its current perimeter expanded and romanticized, similar to the European street markets with stalls/displays of delicious fresh fruits and vegetables; along with gourmet cheeses, artisan breads, fresh flowers, as well as today’s lunch or tonight’s dinner. This multi-sensory experience would be balanced by drive up locations in which the pre-ordered COS items are loaded into the vehicle. Then off the customer goes to blend the COS essentials with the fresh ingredients to make or enjoy an already prepared delicious meal. Does this not represent a more enjoyable shopping experience than the present options? This is something with which Amazon, as currently organized, would have difficulty competing.

Robert DiPietro
Robert DiPietro
11 years ago

Buy online and pick up in-store is the most likely thing to drive short term rewards. The difficult part will be keeping the experience for the consumer efficient during the pickup. Separate parking, drive thru, etc.

The biggest threat is Amazon online, but Walmart can compete, especially if they chose to expand the online assortment. They can win with the convenience and logistics in the delivery of merchandise to the customer.

Dan Frechtling
Dan Frechtling
11 years ago

Two themes stand out: omnichannel and marketplace.

Omnichannel for Walmart leverages 10K locations and shoppers with mobile phones. It can expand same day delivery from points that are within 5 miles of 2/3 of the US population. It can give customers more reasons to opt-in to email, such as e-receipts, to foster increased purchase frequency online and in-store. Walmart can bridge data islands to connect store shopper history with online shopper history, particularly via new apps such as Scan & Go.

Marketplace for Walmart means going beyond logistics to present even greater selection. Even with warehouse prowess, long-tail inventory is expensive. Walmart.com has increased SKUs by over a third, reaching 10X those of a Walmart store—with only 6 partners. It has enhanced its search function to keep pace. The endgame is getting shoppers to bypass search engines and search directly from Walmart.com

Jason Goldberg
Jason Goldberg
11 years ago

It depends on how you define success.

If the only goal of walmart.com is to capture e-commerce orders, it’s unlikely that Walmart.com will surpass Amazon. Largely thanks to it’s marketplace of third-party vendors, Amazon has a much larger assortment than walmart.com, which contributes significantly to Amazon’s traffic (40% of the goods, and 12% of the orders on Amazon are from Marketplace), so Amazon earns almost twice the traffic Walmart does. I don’t see Walmart beating Amazon for all that long-tail traffic. Amazon currently sells over $60B online ($54B direct from Amazon) vs. Walmart.com’s $9B online.

However, if the goal is to generate “Web-Influenced Sales” that will be ultimately fulfilled in any channel, then I think Walmart may already be winning. If only 20% of Walmart’s sales become web influenced, you are talking about $90B in web influenced sales. In many product categories, 50% of in-store sales are already web-influenced, so expecting Walmart to get to 20% does not seem like a stretch.

Last Quarter I noticed that Walmart.com was promoting “Steak” as the primary hero image on its homepage. Yet, walmart.com does not sell “Steak” online; it’s an in-store-only item. So Walmart totally gets that its website has a major role in selling in-store-only items to its 60 million monthly visitors.

Ironically, Amazon drives a lot of in-store sales as well. About 30% of people that want to research a product on-line start their search in Amazon’s search engine rather than Google’s, and many of those searches will complete their pre-shopping online and then buy from a store. Amazon doesn’t have a way to monetize those behaviors like Walmart does.

– Jason “Retailgeek” Goldberg

Gene Detroyer
Gene Detroyer
11 years ago

It is not a matter of the things they are doing, it is a matter of mindset. Walmart sees itself as an enterprise that puts products in consumer’s hands. They see themselves as a go between for those who produce products and consumers. With that in mind, they view themselves quit differently than any other retailer (except perhaps Amazon). That mindset is going to be critical to the future. It is not going to be “how do we get them into our stores?” It is going to be “how we get customers the products they want fast and efficiently?”

In studying the history of companies (and retail is a good example) even the biggest come and disappear. And while the future is never a projection of the past (or the present), we can be confident that the retail landscape will change as much in the next 10 years as it has in the last 50 years. Therefore, the biggest threat to Walmart.com may be a completely new entity of a reincarnation of some existing retailer that too, understands the future.

Herb Sorensen, Ph.D.
Herb Sorensen, Ph.D.
11 years ago

Six years ago I was offering a presentation titled “The Amazonification of Walmart,” and it has been gratifying to see these two fine retailers actually “learning” from each other. Whether that is willy nilly, or by careful planning, I cannot say. However, it is MOBILE where they will most closely intersect. At the end of the day, it is the mobile WALLET that is going to win the day, and lead to further dominance by someone, in the retail space.

I noted favorably Walmart’s partnership with American Express to provide a payment card. This could be simply an incidental development, or part of Walmart’s mobile strategy. Bear in mind, I expect the mobile wallet to transcend retailers, giving the controller of that payment modality the ability to make porous the physical walls of retail stores. Does VISA care which store you buy in? NO! And the mobile wallet won’t care, either, and will become integral to the personal shopping assistant, AKA smart phone. This will further reduce “ownership” of the shopper by any physical store.

This raises the question of where Amazon is on either of these two crucial components of the future of retail: the mobile wallet and/or the smart phone. With Amazon’s considerable success with Kindle, perhaps and Amazon “phone/wallet” is in the offing. But I haven’t heard.

David Dorf
David Dorf
11 years ago

Walmart is on the right track, but catching a moving target like Amazon is no easy feat. Recent innovations from Walmart have been impressive, and their goal of owning the entire shopping process, from budgeting to buying, makes lots of sense. For me the key is always leveraging your existing competencies to differentiate. If Walmart can perfect “buy online, pickup in-store” and then eventually next day delivery, then they will thrive. Two thirds of the US population lives withing 5 miles of a Walmart store. Amazon can’t touch that.

Brian Kelly
Brian Kelly
11 years ago

While WMT is the uber threat to AMZN and vice versa, history says (think category killers) small, category alternatives will emerge to more specifically and relevantly surprise and delight. Those with a focus upon unique buying behaviors will win in there areas against mass. Some exist, you know who they are, others will innovate and they are inevitable. The butterfly will beat the elephant.

Or as we like to say, “retail ain’t for sissies.”

Lee Kent
Lee Kent
11 years ago

Once upon a time, when Walmart first came into being, I used to openly say that Walmart was not a retailer. They were simply a flow-thru distribution center. Walmart didn’t have to merchandise like a real retailer. They didn’t even have to think much about their customer or their stores. Well I was right and they were wrong!

Amazon came along and again I said they aren’t really a retailer. They don’t have to….but Amazon got it right! They figured out that it is indeed important to merchandise, think about convenience, and make the process please and delight the customer. Aha, they are a real retailer and Walmart has some catching up to do.

That means more than just picking stuff and putting it into boxes. It’s the part about pleasing and delighting the customer that Walmart needs to focus on. IMHO

Craig Sundstrom
Craig Sundstrom
11 years ago

I’m dubious: WM was built on minimal staffing—according to some people on RW, “minimal” in every sense of the word—but “picking items from the shelves and putting them in a box” takes labor…something has to change in the business model for this to work.

Shilpa Rao
Shilpa Rao
11 years ago

Pricing is Walmart’s forte in brick and mortar stores. Though they were late to catch up, they are playing the same game online. Walmart.com has incrementally transformed itself, making quite easy to shop. I like the reviews feature which is quite useful and quite unlike Amazon’s.

Also creating solutions starting with the home department where they have things like a man cave and others is really blurring likes between specialty retailers and Walmart.

I think the biggest strength would be understanding the cross channel customer and designing solutions for their needs, e.g. the shopper trip in the store.

James Tenser
James Tenser
11 years ago

Does the headline above pose the right question? Maybe we should be asking how Amazon will adapt its strengths to the brick and mortar side of the equation. Will it acquire a nationwide chain of strip-center specialty stores in the near future (for example)?

I expect Walmart will discover that in-store lockers are a clumsy substitute for just picking up pre-ordered items at the customer service counter. I don’t foresee much labor saving, and there will be plenty of opportunities for technical glitches and adjustments that will require the intervention of the customer service person anyway.

Gordon Arnold
Gordon Arnold
11 years ago

Walmart is a big box store with retail growing pains. Thinking and acting outside of the “box” is at best speculative for them. E-commerce companies are likewise clumsy when they make an attempt to create complimentary storefront expansions. Retailers of any type are being forced to expand into unknown markets and core business market share to maintain acceptable growth within in the constraints of the dismal economy the world continues to wrestle with.

I am not so sure the executives of Walmart and Amazon are chasing after each other’s customers. I am confident that if they were to follow only their core business model plan, disaster would be a likely result. There are fewer consumers purchasing far less than they did 7 years ago. The present day consumer is maximizing their reduced buying leverage with whatever tools they have available.

Smart retailers will try new sales approaches in search of consumer doubloons for their products both old and new. When the economy returns to real growth we will see who the big players are in the different retail ponds and what real success they can edge out and keep control of in different waters.

Shep Hyken
Shep Hyken
11 years ago

The concept of ordering ahead of time with in-store pick-up is working for certain retailers. My take is simple. The ability for customers to go online to purchase is already there. They have a bricks and mortar network of stores. Combining the two is obvious. If it makes doing business easier for the customer, and it works within the system of the retailer, try it.